PRITHVIRAJ KAVEDI,MUMBAI vs. ITO-16(3)(1), MUMBAI

The aforesaid appeal has been filed by the assessee against the impugned order dated 25.11.2019, passed by Ld. CIT(A)-30, Mumbai for the quantum of assessment passed u/s 143(3) r.w.s. 147 for AY 2015-16.

The facts in brief are that, assessee is an individual and engaged in the business of dealer in Pumps & Pipes. During the year under consideration, assessee has declared the turnover of Rs. 2.69 crores on which assessee has earned gross profit of 13.93% and net profit of 1.58%. The return was filed on 30.09.2009 declaring total income at Rs. 3,11,043/- and the same was accepted u/s 143(1). Thereafter the case was reopened u/s 147 by issuing notice dated 25.03.2013 u/s 148 on the ground that information was received from DGIT (Inv), Mumbai which was in turn based on the information received from the Sales Tax Department with respect to some of the dealers indulging in providing accommodation entries by issuing bogus sales /purchase bills without supplying any goods. However, in respect of 7 parties, the notice could not be served and were returned back unserved by the Postal Authority. The details of purchase amount of this 7 parties Prithviraj Kavedi are given at page no. 2 of the assessment order, aggregating amount of Rs. 29,26,845/-.

Before the AO, assessee has furnished the following details:-

Ledger accounts and purchase invoices of the specified parties.

Confirmation of above parties. 3. Copies of bank statements evidencing payments made through proper banking channels by issuing account payee cheques are also enclosed for all these parties, highlighting the relevant entries. 4. State of sales quantity and party wise against the purchase party along with tax invoices. 5. Copies of sale bills showing details of corresponding sales to various parties for the year under consideration are also enclosed herewith. 5. Assessee further submitted that the quantitative details of purchase goods from the above dealers alongwith names, bill numbers, date, description of goods, quantity, price, gross amount, VAT and net amount. Assessee also submitted list of corresponding sales made out of these purchases with similar details. Thus, it was submitted that once the quantitative details are matching with the purchases and sales, the purchases cannot be treated as non- Prithviraj Kavedi genuine. Assessee has also filed copies of bills alongwith delivery challan and also shown that payments were made through banking channels. The details submitted by assessee are incorporated in page no. 4 to 7 of the assessment order. However, AO rejected the contention of the assessee and held that it is the part of modus operandi to reduce the true profits by inflating the expenses including purchases and assessee could not produce those persons nor notices could be served. Accordingly, AO added the entire purchase of sum aggregating to Rs. 29,26,843/-.

Ld. CIT (A) has confirmed the said addition after refereeing to various judgments.

We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as material placed on record. It is an undisputed fact that during the course of assessment proceedings, assessee had furnished all the details of purchases including confirmation from the 7 parties, copies of bank statements evidencing payment through banking channel, all the details of purchase invoices and purchase quantity and corresponding sales of the said quantity alongwith the bills. Apart Prithviraj Kavedi from that, assessee has also filed copies of bills and delivery challans for supply of goods. However, AO simply relying on the information received from Maharashtra Sales Tax Department and the notices could not be served to these parties, has added the entire purchases when assessee has filed all the documents relating to purchase including quantitative details. The source of payment is from the books and through banking channel and corresponding quantity wise sales relating to the said very purchases have been provided. Therefore, without finding any defect in the quantity of sales and the quantity of purchases on record, the purchases cannot be treated as bogus, simply because the suppliers have not appeared before the AO or has not responded. This principle has been followed by the Hon’ble Bombay High Court in the case of CIT vs. Nickunj Exim Enterprise reported in (2015) 372 ITR 619; further, in the case of PCIT vs. Vaman International Pvt. Ltd. (IT Appeal No. 1940 of 2017) order dated 29th June 2020, the Hon’ble Bombay High Court held that merely relying on information obtained from Sales Tax Department and some statements are not sufficient to treat the purchases as bogus, if assessee has filed the copies of purchase bills, copies of sale invoices, challan, tax invoices Prithviraj Kavedi in respect of extracts of stock register, stock ledger and the payments have been made through banking channel, thus the purchases cannot be treated as un-explained expenditure u/s 69C.

Here in this case as noted above, all these purchases have been debited to the books of account and the source of purchase have not been doubted, therefore, it cannot be held that these are unexplained expenditure not recorded in the books of account. At least AO should have examine whether there is any defect in quantitative details or there is any defect in corresponding sale of purchases or there is any doubt that purchase items have not been delivered,s once the assessee has filed the delivery challan. Therefore, under these circumstances, we do not find any reason to treat the purchases as un-explained. Accordingly, the same is directed to be deleted.

In the result, the appeal filed by the assessee stands allowed.